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C00002 00002	THE IBM ANTI-TRUST CASE AND THE PUBLIC INTEREST
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THE IBM ANTI-TRUST CASE AND THE PUBLIC INTEREST


	The  Justice  Department  started  a  few  years  ago  a  new
anti-trust  case against  IBM.   In  addition, CDC,  various software
companies, various companies making peripheral equipment, and various
leasing companies have also filed suit.  The purpose of this essay is
to try to determine what the interests of the the various parties are
in the matter and especially what should be the stand of the computer
scientists. 

	We may consider that the public has the following interests:

	1. It wants good computers at reasonable prices. 

	2. It wants a wide variety of choice in computers, peripheral
equipment and software. 

	3. It wants  the technology  to develop rapidly  and for  new
ideas to be encouraged and tested. 

	IBM has the  following interests, and  I will not  presume to
speculate on their relative importance:

	1. Its stockholders want the stock to go up. 

	2. Its executives,  and engineers and scientists want to do a
good professional job in providing computers. 

	3. Its salesmen want to beat the competition and exceed their
quotas. 

	4.  Its executives  want to  lead a  peaceful life  and avoid
harassment and lawsuits. 

	5.  All  its  people  would like  to  keep  it  intact  as an
organization, because to do otherwise would make life very uncertain. 

	IBM's competitors have the following interests:

	1. Survival as organizations.  For some of them,  this is not
a serious  question, but others have gone  broke for various reasons.
Even if IBM is not directly involved  in a debacle, there is often  a
possibility of survival by pressing IBM on  monopoly grounds.  In one
case,  a few years ago,  it seemed to  me that a  company that didn't
deserve to survive succeeded in blackmailing IBM into giving it money
and agreeing not to compete with it in a certain market. 

	2. Profits. 

	3. Assured markets. 

	4. Doing a good job. 

	The Justice Department has the following interests:

	1. Their conception of what the public interest is.  Breaking
up  a  company with  70 percent  of the  business  in an  industry is
certainly the obvious solution,  but there are drawbacks.   The first
is that when  elephants fight, the mice get stomped.   If IBM and its
resources were divided into three or four parts and competed  freely,
each part  might be  so strong  that the  non-IBM computer  companies
would be wiped out. 

	2. Individually, the Justice Department lawyers would like to
make their reputations by winning the big case. 

	In my opinion, the  following additional considerations  need
to be taken into account:

	1. The present situation is  not intolerable.  IBM's fraction
of the  market has been stable since the computer business started in
the early  1950's.   Its competitors  have prospered  when they  made
better computers than IBM in  some market and have declined when they
have made  worse.   The  same is  true  of the  peripheral  equipment
manufacturers, the software companies and the  leasing companies.  On
the other hand, perhaps the situation can be improved by some kind of
anti-monopoly action.  We shall come to that. 

	2. The interests  of the competitors  are not identical  with
the interests of the public.   If present trends continue, the result
may  be the  creation of  a cartel,  i.e. an  agreed division  of the
various markets, created and maintained by the  U.S. government under
the illusion  that it is promoting  competition.  A  prize example of
the creation of a cartel is the recent settlement between IBM and CDC
wherein IBM agreed to give CDC its  service bureau subsidiary and not
to compete in  that business any more in exchange for CDC calling off
its anti-trust suit.  IBM had much less than half the  service bureau
business, so that this agreement probably reduced competition in that
business.    As  such,  some  of  the  other  companies attacked  the
agreement, but it may  be that each of  them will be satisfied  if it
gets its cut.  Certainly,  the fears of going out of business of many
companies would be alleviated by an agreed market division. 

	In my  opinion,  this would  be  very bad  for  the  country.
Philco and General Electric and RCA and a number of smaller losers in
the computer business  deserved to go out of the computer business in
the sense that they made no product not bettter made by someone else.
Once a cartel has been created, any company about to go under will be
able to demand a redistribution of the business.  This will be at the
expense of the users of computers. 

	Another proposal by  one of the  competitors was that IBM  be
broken up  according to product lines,  e.g. into a  145 company etc.
(This was their example).  The effect of this would be to preserve  a
division of computers by size that is  probably already obsolete.  It
would  also be a  legal nightmare to  determine what  is a legitimate
successor of a 145 in a different technology. 

	3. The public has suffered  from the dominance of IBM in  the
following ways only some of which may be remediable by the courts:

	a. IBM has built less than optimal computers and their losing
features  have  been  copied  by  the  competition.    Here are  some
examples: For many years, no-one built computers  that addressed more
than 32K words, because IBM was building successors to its successful
704.  No company  except D.E.C. with the  PDP-10 has really made  the
full transition  to time-sharing  computer systems.   No-one had  to,
because  IBM goofed  when they  came out  with the  360 as  they have
recently realized and admitted. 

	It is not clear whether an altered structure of  the computer
industry would help.  It may merely a plea that computer engineers be
smarter and see further ahead. 

	b.  IBM's  secrecy  certainly works  to  the  disadvantage of
progress in the computer  field.  Because, almost no-one  outside the
company knows what they are  doing, there is no criticism if they are
hatching a large egg for the  public that will appear in five  years.
The lack of time-sharing for  the 360 is a case in point,  and I have
reason to fear they will lay another suboptimal egg in a few years. 

	IBM's  excuse  for  this secrecy  is  the  anti-trust consent
decree of 1965 which forbids them to hint at new products before they
are ready to  quote price, performance and delivery.   Certainly, the
Justice Department has always allowed them to maintain this position.
However, IBM has  a tradition  of secrecy dating  to long before  the
consent decree,  and the secrecy has  been applied in  areas far from
new products.   Moreover,  even  in the  area  of new  products,  the
secrecy is mainly to the disadvantage of competition.  This is a case
where lack  of technical knowledge by the  Justice Department and the
courts led to results which were opposed to what they were  trying to
promote.  Let me illustrate these assertions. 

	First, IBM's tradition of secrecy.  One retired IBM scientist
told me  that when he started at IBM in 1949, each senior engineer at
Endicott locked up his laboratory at night, and the laboratory didn't
open  until he  unlocked it  in  the morning.   At  that  time, IBM's
business was in  electro-mechanical devices with  a long  development
time, i.e.  inventions in the  classical sense,  and this has  always
been the  fortress of industrial secrecy.   IBM became gradually less
secretive until the early 1960's and then got worse again.  At least,
this is my personal impression as an occasional IBM consultant. 

	Second,  two examples  of the  secrecy going  far beyond  new
products.   Both of these are based on personal experience.  In 1962,
I  published  a  method  for  defining  the   semantics  of  computer
languages, and  an IBM laboratory  took up this  method, improved it,
and used it  to describe the  semantics of IBM's  new language  PL/I.
Because of personal contacts  and because I was an  IBM consultant, I
was  aware of  this, and when  a big  report was ready  after several
years I received a copy of it as an IBM Confidential document.  After
considerable protest on my part,  they "declassified" the reports and
the  work has been public since.   Everyone concerned agreed that  the
work was of a general scientific character and revealing it in no way
pre-announced  a  product.    Such  was the  atmosphere  of  secrecy,
however, that it  required the  protest of  an outsider  accidentally
aware of it, to get it released. 

	A second  example is  the manual  for a  version of the  LISP
programming  language that IBM  Research prepared  on the basis  of a
version of LISP for the IBM 360 developed at Stanford University.  It
was also  declared condidential,  and, so  far as  I know,  was never
released. 

	I  don't know what other purely  scientific treasures IBM may
be hiding, more through inadvertence than policy. 

	However,  the major  disadvantage  of  IBM's secrecy  to  the
public  is its  effect on  competition and  progress in  the computer
industry.  Perhaps we  should put it another  way.  Namely, here  are
some major advantages to making IBM modify its secrecy policy: